Disclaimer
I am just a blockchain and cryptocurrency enthusiast who believe in its future, not a professional trader or financial advisor. All info I provided is based on my experiences, knowledge and personal opinions. Do your own research and proceed at your own risk.

Part 2: How to get started and investment strategy

Missed part 1? You can find it here https://steemit.com/cryptocurrency/@lhomel/why-blockchain-and-cryptocurrency-will-change-the-internet-world-forever-and-how-you-can-take-advantage-of-it

How to get started?

If you are reaching this part, I hope that you are not boring with all concepts and definitions I put together in part 1. I also hope that you feel more confident to invest into cryptocurrencies and believe in their future.
In this part, I will guide you step by step how to buy, store and sell cryptocurrencies. I will also tell you why I chose Ethereum as my first coin to invest rather than Bitcoin.

Buy

To buy cryptocurrencies, you need to sign up an account on an exchange, deposit fiat (AUD, USD, EUR and etc.) and buy the cryptocurrency you want. I will use ETH as the example because I just love ETH.

These are exchanges in US and Australia which I know about. I never use US exchanges as I am not in USA so proceed at your own risk.

USA:

• bitfinex.com
• gdax.com
• coinbase.com

Australia:

• btcmarkets.net
• coinspot.com.au

I am using these 2 Australian exchanges so I can confirm they are legit. Both require identity verification to deposit AUD to buy coins.

BtcMarkets offers 5 different coins: Bitcoin, Ethereum, Litecoin, Ripple and Bitcoin Cash. Its instant deposit limit (via POLi) is 2000 AUD / day. Its fee starts from 0.8% down to 0.5% bases on your transaction volume in the last 30 days. You can find their fee here: https://www.btcmarkets.net/fees. I normally use this exchange to buy ETH and Ripple because of its low fee and lower price. This market works on buy/sell orders so you can put buy order at your desired price and it will match your buy order with the sell order on the same price.

Coinspot.com.au offers nearly 50 different coins. Its deposit limit is up to 10,000 AUD/day. However, its fee is quite high from 2% to 3% for different coins. I normally use this exchange to buy coins which are not available on BtcMarkets. This exchange is instant buy/sell as soon as you agree with their price, the buy/sell request happens straight away.

Note that it can take 1 – 2 days for the verification process and another 1 – 2 days for your 1st deposit to be funded on the exchange so even you are not ready to trade, I suggest you create the account and get it verified in advance.

There are other exchanges that you cannot depost fiat (USD, AUD) to buy coins directly such as https://bittrex.com. However, you can deposit Bitcoin (BTC) to buy a lot of other coins. I use Bittrex to buy coins which are not available on BtcMarkets and Coinspot.

Sell

After buying coins, you can keep it in your account on the exchange and you can sell it at anytime you want.

Selling on BtcMarkets requires your price to match the buyer’s price. If the highest buy price is not your target, you can place a sell order with your desired sell price and the system will match automatically when someone else willing to pay that price.

Selling on Coinspot is instant. As soon as you agree with Coinspot’s price, you can sell and get AUD back straight away.
After having AUD in your account on exchanges, you can withdraw it into your nominated bank account. It takes 1 – 3 days depending on the exchanges.

You can also deposit coins from different exchanges or your coin wallets into these 2 and sell there. Note that you can deposit all 5 coins to sell on BtcMarkets but Coinspot only accept Bitcoin and Litecoin deposit.

Store

If you want to do margin trading or day-to-day trading, you should keep the coins on the exchanges, sell high and buy low to make profits.

However, if you want to invest long-term. I suggest that you withdraw the coins to your personal wallets. Each coin will need to be stored on different wallets. i.e. You need to have Bitcoin wallet for Bitcoin (BTC), Ethereum wallet for ETH and etc. Some apps support multiple wallets.

Wallets

There are different kinds of wallets

Hardware wallets
This is the safest wallet in my opinion. You can buy one, plug it in your computer and deposit your coins from exchange into this wallet. Then, unplug in from the computer. Because it is not connecting to the network all the time, nobody can hack your wallet.

There are 2 popular hardware wallets which are Ledger Nano S and Trezor. Make sure that you only buy hardware wallet from trusted stores, never buy one from eBay or second-hand as it may be reprogrammed to steal your coins.

Mobile app / computer app wallets
These wallets are mobile app or computer program installed on your smart phone or computer. These wallets are pretty safe as well unless you got virus or malware on your computer.

I am currently use Jaxx on my iPhone. Jaxx can store multiple coins such as Bitcoin, Ethereum, Litecoin and many Ethereum based tokens.

Exodus is a good wallet for computers (PC and Mac). Make sure you download it from the correct website https://www.exodus.io

Wallet public address and private key

Each wallet has a pair of public address (public key) and private key. Public address is for people to send coins to your wallet. Private key is for you to access your coins and send it to somewhere else. NEVER give your private key to anyone as they can steal your coins.

Private key is stored on the blockchain of the coin so that as soon as you control your private key, you can access your coins anywhere using any supported wallet. E.g. when you create a new wallet on Jaxx mobile app, you can export your wallet’s private key and use it on Exodus desktop app to access your coins.

My way to secure my private keys is that I put all of them in an Excel spreadsheet, zip it using 7-zip with complex password and upload it to cloud storage such as Dropbox or iCloud.

Checking transaction status and history

You can check the transaction status using blockchain explorer website. Each blockchain has different explorer websites. You can also check the entire transaction history of a wallet address if you want to.

When sending coins to exchanges, even your transaction has been confirmed by 1 block, the exchange may still not credit your coin. Exchanges normally credit you the coins after 2 confirmations for Bitcoin and 6 confirmations for Ethereum. However, some smaller exchanges need up to 50 confirmations. Therefore, do not panic when you don’t see your coin available in the exchange even it is confirmed on the block explorer. Give the exchange some time.

• Bitcoin explorer: https://blockchain.info
• Ethereum explorer: https://etherscan.io

Other coins have their own explorers that you can easily google.

Actions to get started

This is the list of actions to get you familiar with the buy/sell and deposit/withdrawal process. I list these actions as the process on btcmarkets.net which is an Australian exchange. Other exchange should work the same.

1. Go to https://www.btcmarkets.net, click on create account and fill the form to create your account.
2. Login to btcmarkets, go account menu, go to two-factor authentication (2fa), read the instruction and enable 2fa. This puts another security layer on your account.
3. Go to ID verification menu, read the instruction and verify yourself.
4. Go to deposit menu, scroll all the way down to POLi payments, check that your bank is available on the list or not. If yes, you can deposit money using POLi. Let’s deposit $100 first.
5. You will need to login to your internet banking to verify the transaction. This is done by POLi, an Australia Post’s company, so it is pretty safe. There is $3.30 fee for every POLi deposit.
6. It may take 1 – 2 days for your fund to be available on the exchange. After your fund is available, go to menu Buy/Sell. Select Ethereum exchange ETH/AUD.
7. Scroll down to the buy box and let’s buy some ETH. Look to the sell orders list, you will see there are some sell orders there. The first record is the lowest sell order. Go back to your buy box and click on “Spend All” which means you spend all your $96.70 to buy ETH at the lowest sell price. Click “Buy ETH”. Yayyy! You’ve got your first ETH. It could be only 0.3 as the current price of 1 ETH is $320.
8. You can keep it there and wait for the price to go up to sell. If you want to sell, enter the amount of ETH you want to sell and your asking price. You can look at the buy order list and sell at the highest buy price.
9. After getting some AUD from your sell, you can go to menu Account, then menu Withdrawal, scroll all the way down to “AUD - Using Domestic Bank Transfer”. Enter your bank account if it is not there or double check if it is there already. Enter AUD you want to withdraw, enter your password and hit “Withdraw”. I hope that you already make some nice profit at this stage 😉
10. If you want to withdraw ETH to your private wallet or send it to someone else, you can do that in the “Withdraw” menu as well. Let’s setup a mobile app wallet.
11. Go to App Store on iPhone or Google Play on Android and download Jaxx (https://jaxx.io). Open the app and setup your pin number.
12. On Jaxx app, go to menu, select wallets and tick ETH – Ethereum to enable ETH wallet. If it is already ticked, exit the menu.
13. The app will initialize a new Ethereum wallet address for you. You use this address to receive ETH from somewhere else. Copy that address. Make sure you COPY and never type the address as typo mistake can make you lose your fund forever.
14. Go back to “Withdrawal” menu on BtcMarket, go to withdraw ETH and enter your copied ETH wallet address in previous step. Make sure you copied (2nd warning). Enter 0.101 to the amount box. You will notice that there is 0.001 transaction fee. For ETH, sending 0.1 or 1000 ETH stills takes only 0.001 ETH as transaction fee. Hit ‘Withdrawal”. It will take couple minutes for the fund to appear on your Jaxx wallet.

Investment Strategy

Which coin should I invest?

For me, there are 2 types of coins when I am looking at the market: the stable, established coins and the new, potential coins.

The established coins can be found at the top 10 market cap coins: Bitcoin, Ethereum, Bitcoin Cash Ripple, Litecoin and etc. These coins already have large market cap and quite stable in price. When I say “stable” in the world of cryptocurrency, I mean its fluctuation is in the range of -10% to +10% per day if there is no major event.

You can see all coins listed here https://coinmarketcap.com. Click on the name of the coins to view its graph and top exchanges which you can buy it from.

The new and potential coins still under development or just have very simple products which needs improvements. These ones can easily go up to x2, x3 times in the future and some of them can be x10. They are high risk, high return of course. Some of these coins are NEO, OmiseGo, Qtum, Steem, BAT, Siacoin and etc.

I would not recommend you invest 100% in one coin. Diversification is good and the suggested ratio is that 70% in established coins and 30% in potential ones. For people who are risk-takers, you can put it 50 – 50 or even 40 – 60. You just need to know when is the optimal entry point (OEP)

Optimal Entry Point (OEP)

Because the cryptocurrency market is very volatile. It can go up and down 20% - 30% easily in a single week. Therefore, finding an optimal entry point to put your hard earn money in is very necessary. Different people will decide different OEP. The risk taker can enter the market when it is in downtrend to earn more profits. My method is simple.

For established coins, I would enter the market to buy when the current price is in the range of 20% - 30% lower that its most recent peak. E.g. Ethereum was peak at 500AUD recently in late Aug, 2017. I would buy at 350 – 380AUD price.

For potential coins, the good OEP is at 50% – 60% lower that its most recent peak. E.g. NEO was peak at 40AUD recently in early Sep, 2017. The OEP is about 18AUD – 22AUD.

This is just a simple indicator that allows me to enter or buy more. Different coins can have different OEP depends on the current development stage, recently released news and of course market manipulation of the wealthy investors.

Bitcoin vs Ethereum

I will not provide analysis for all coins that I mentioned in this article because I feel each coin deserve a dedicated article to fully cover its purpose, history, current status and future potentials. Therefore, I just provide my opinion on Bitcoin and Ethereum which are the 2 largest coins by market capitalisation at the moment.

Bitcoin

Bitcoin is founded by an unknown person named “Satoshi Nakamoto”. His/her identity is still in the dark. The Bitcoin whitepaper was released in Oct, 2008 and the first bitcoin in genesis block was mined on 3rd Jan, 2009. In May 2010, one guy first to buy 2 pizzas with 10,000 bitcoins which is value at 35 million USD at the moment – the most expensive pizzas ever.
Just a little bit of history, Bitcoin works simply like a currency which is backed by no bank and no government. At the end of the day, a value of bitcoin is determined by people who believe in its value. If anyone agrees that 10,000 bitcoins are worth 2 pizzas, that’s the price of 10k bitcoins. The bitcoin blockchain just simply records currency transaction which only contains the sender, the recipient and the amount. Although, there are a lot of applications written to run on top of the bitcoin blockchain to do several things, its core codebase was not changed since 2009.

Ethereum

Remember the loss of rare gaming item example I gave about blockchain immunitability in part 1? It was the trigger for Vitalik Buterin (https://en.wikipedia.org/wiki/Vitalik_Buterin) to co-founded Ethereum. The Ethereum whitepaper was published in late 2013 and the genesis block was mined in July, 2015. It was only 10USD/coin back in Dec 2016 and it grew nearly x40 times to 400USD/coin in June 2017; then, came back down to 300USD as the time I am writing this. So what makes Ethereum become the second largest cryptocurrency in short period of time if we compare with others?

Ethereum is a public blockchain platform featuring smart contract functionality. Imaging that you can write a contract and decide when and how it get executed, then put it on the blockchain. e.g. Bob and Peter want to place a bet on which football club will be the champion of UEFA Champions League in 2018. They can write a smart contract to describe who pick which team, the betting amount and other conditions; then, put it on the Ethereum blockchain. The smart contract is coded to executed on a day after the final match. It will go to a reliable source on the internet, pick up the result and decide Bob or Peter wins. Finally, it will automatically send the fund to the winner without any issue. Let’s apply the same concept to other contracts such as money transfer, service agreement, purchasing property and even voting to elect a new president.

The power of Ethereum is to provide a platform that developers can write apps to do other things on it with all benefits of the blockchain. You can treat is as Windows or Mac operation system. And ETH, the currency of Ethereum network, is used as the fuel to power these apps. i.e. apps running on Ethereum blockchain need to use ETH to pay for transaction fee. Investing in ETH currency likes investing in oil/gas in the blockchain ecosystem.

Why I choose Ethereum over Bitcoin

I personally think that Bitcoin is not going anywhere soon. It will still be the leading cryptocurrency and the store of value for many investors. However, thinking of the potential grow and wide adoption, I would pick Ethereum as my first cryptocurrency to invest in (I actually did).

Other issue with Bitcoin is that it has been here for the long time and there is large community, miners behind it so there was some politics involved when it needs changes for improvement. It is somehow slow down the development of Bitcoin. Moreover, its technology is somehow quite old in term of blockchain development and it limits to only sending and receiving the currency.

Ethereum has its own issue. There was a hacking event that happened in June, 2016. The event caused the split in the community and a ‘hard fork’ was triggered to restore the lost funds for investors. The ‘hard fork’ violated the authenticity and immutability of the Ethereum blockchain so the people (about 10% Ethereum supporters and developers) who did not support the ‘hard fork’ maintained the hacked blockchain which is now called Ethereum Classic. The majority, including Ethereum co-founder Vitalik Buterin, continues working on the Ethereum network and the ETH currency has grown nearly x40 times in value in the last 9 months. The fact, that it continues growing and attract more larger players such as Microsoft, Intel, Toyota, Deloitte and etc. to found the Enterprise Ethereum Alliance (https://entethalliance.org/members), proved that everyone is already over the hacking event and believes in the future of Ethereum as the platform to develop decentralised applications (dApps).

Terms

There are some often used terms when you read people talking about trading, trend and news on the internet. I list some here so you can get used to them when doing your own research.

• Bull, bullish market: this term comes from stock trading market. The bull market means it is currently going up or will have the uptrend. It’s called ‘bull’ because the way of a bull attacks its enemy is upward, moving its horns from the ground and up. Investor should buy in bullish market.
• Bear, bearish market: opposite to the bull. A bear attacks its enemy with its claws downward so this term means the market is going down or it is predicted to have down trend. Investor should sell in this market.
• Whales: people calls rich and wealthy investors ‘whales’ because they can manipulate the market by selling and buying. Whales normally have multi millions of dollars in their investment fund. When they sell, they will cause the price goes down dramatically. When they buy, the price will go up significantly. The whales normally sell and buy to manipulate the prices. Smaller investors normally look for whale sign to act accordingly.
• HODL: this is the typo mistake of the word ‘HOLD’. It was a joke first in the Bitcoin community but now becomes a well-known word especially for ‘holding your coins long-term, do not sell’.
• FUD: it stands for Fear, Uncertain and Doubt. People using this term when talking about rumours or unofficial news that spread fear to the crypto market. As a result, it triggers sell and bearish trend. Some news is official but get analysed incorrectly that can spread FUD as well. E.g. ‘China bans ICO and cryptocurrency exchanges’ news couple days ago.

My own experience

I will use the last section to share my own experience from when I first joined the cryptocurrency market months ago.
Invest what you can afford to lose

I started with 1000AUD investment which if I had lost, I would have been still fine and gone on. I was lucky that the initial investment got me some profits so I continue using the profits to reinvest. Start small first until you are confident enough to invest more.

Aim for long term

This may be just my thing but I tried daily trading and it didn’t work. I lost money when trying to predict the market in short period of time.

Cryptocurrency is just at the second stage of its development. The public does not fully aware of its potentials so that traditional investors are still out of the market. Investing in the correct coins can give you at least x3, x4 times gain in long term. When I am saying long term here, I mean 6 months, 12 months and maybe 24 months, not as long as 5 - 10 years likes investing in real estate to get the same gain.

Aiming for long term helps you save time as well as not fall in to the trap of FOMO which stands for fear of missing out. An example of FOMO, when you see the price went up 30% - 100% in 1 – 2 days, you are fear of missing the opportunity to get some profit so you pour money in to buy. It turns out that it is the whales manipulate the market and after the price reaches certain point, the whales cash out their profit by selling a lot. Price drops and you get burnt.

Get support

Share your investment, opinion and analysis with your family, friends or even with me and get their views and support. I do this all the time. People from different backgrounds with their own expertise can give different aspects on the same coin. One of my purposes when writing this article is that I would like to connect with other people who have different skills in business analysis, banking, finance and etc. so I can learn more from them.

Exit strategy

Setup the initial goal so you know when to exit the market. You can cash out partial of your investment and keep the rest in the market. My first goal ever was cashing out my initial investment and just use profits for further trades so I can feel confident not losing anything.

What’s next?

As I said, I would like to maintain a small community starting with my friends first so we can discuss and learn from each other. May be a closed Facebook group?

I will also write a market report or a coin analysis every one or two weeks and publish it to Steemit.

If you guys have any comments, questions or requests, feel free to do so in the comment section.

References

• https://www.businessinsider.com.au/heres-a-blockchain-explanation-your-parents-could-understand-2017-6
• https://en.bitcoin.it/wiki/Category:History
• https://blog.ethereum.org/2015/07/30/ethereum-launches
• https://www.coindesk.com/understanding-dao-hack-journalists
• https://entethalliance.org
• https://coinmarketcap.com